The External Funds Needed (EFN) equation does not measure the:
A) additional asset requirements given a change in sales.
B) additional total liabilities raised given the change in sales.
C) rate of return to shareholders given the change in sales.
D) net income expected to be earned given the change in sales.
E) None of these.

Question

Quizplus · Accepted Answer

The EFN equation is used to determine the amount of financing needed to support an increase in sales. It calculates the additional assets needed and the additional liabilities that must be raised to cover those assets. It does not directly measure the rate of return to shareholders or net income expected to be earned. Therefore, option C is the correct answer.

The External Funds Needed (EFN) Equation Does Not Measure The